Banking Shore Leave

For those out working every day to stay afloat, a review of the daily news put forth by the drive by media reveals an economy slowly emerging from stability, albeit with anemic growth. The worst is over. Everything is fine, nothing to see here.

But if you look closely at what is really happening, there is major economic trouble lurking about all over the place. Much of the focus has been on Europe, as they struggle to escape a collapse. A European collapse would certainly be a major problem for US financial markets, which are in real trouble.

In particular trouble are the banks. As has been noted repeatedly, banks are borrowing at next to free from The FED and can lend to customers at approximately 5%, which would command high profit levels. But little lending is taking place, as lending for the housing market is extremely difficult to command, credit lines are evaporating and small business loans are rare. In fact, now loans to small business are being called.

The Los Angeles Times details a story of a small business owner having his loan called by Bank of America. He has the option of paying it off or restructuring at a new increased rate. Fox Business Network's Gerri Willis discusses this situation.


What motivation would the banks have to alienate customers in this fashion? Well, there are much bigger issues the banks are facing, and Economist David McAlvany outlines the problems to FOX Business's David Asman. Take a listen:



Under extreme duress, at what level will the banks stop in attempting to call loans and restructure loans not called at substantially higher interest rates? Most people are barely surviving now, so restructuring of this kind will bankrupt many with the banks seizing whatever assets they can. Seems far fetched I know, but did it just happen in the MF Global saga?

Ann Barnhardt thinks so. Barnhardt joins Warren Pollock to discuss this situation and what may be coming.


While portions of the forecasting going on may be worst case scenarios, it is clear that the economic standing of Uncle Sam is not on sound footing. Contract law is being broken, as evidenced by the auto bondholders, and the transformation of wealth (theft) is taking place. Banks are attacking customers, and the raising of credit card interest rates is a small example.

It is going to be an interesting time as we move through the 2012 election, and you should take steps now to secure your financial footing if possible. Should Obama, who has demonstrated his disdain for the rules set forth by our Constitution by his eagerness to bypass Congress to implement his ideas, be re-elected, a top down governmental dictatorship may be our future.

It will be the end of America as you once knew it; no longer a nation of laws, but a nation of men.